Equity Research is a must be it for IPO or for picking up a share for investment.
How to short list few companies from 1000s of shares that are being traded in NSE and BSE.
The following are few aspects one has to study.
- Promoters - Much will depend on the background of promoters and their track record of building businesses and making profits. Besides it is also important to analyze their efforts to enhance shareholders' value.
- Industry - One has to look at the competitive landscape and understand how the company is stacked up against the competition. What are the key management strategies the company has adopted to stay ahead of others in the industry?
- Operating Margins - just being in the sector is not enough, the company has to demonstrate that its OMs are competitive and rising.
- FCF - it is essential that the company should have positive cash flows and should be able to keep its debt at a low level.
- Technology - It is essential that the company adapts and absorbs.
- Returns - company should have a healthy return on equity with a good visibility of robust business
- The equity size which is coming for IPO should not be too large nor too small. Depending on the company size there is not much of dilution of equity.
- One can go through the Brokerage Reports and understand how they are recommending and what are the points which help them go come up with the recommendations to investors.
- All listed companies have to publish Quarterly Results period ending 30th June, 30th September, 31st December and 31st March. Carefully analyze and if the results are not as per our expectations get rid of the shares. If they are doing good keep adding on declines.
Do not get excited when the share lists at a premium, not get sad when it is listed at a discount.
Market will take time to digest and discover the right price after 6–9 months from the date of listing.